Tech office market heats up

“The demand is definitely up,” Clark said. “Things slowed down thanks to the announcement of tariffs, and then when we got through Labor Day, a lot of companies made the decision that they can't hold out for any longer, and that's led to a strong demand in the late Q3, early Q4 period.”

Tech firms are starting to occupy more space along the Caltrain corridor in particular, and places like San Mateo, Foster City and Redwood Shores have seen stronger demand, he added.

“We’re also beginning to see more demand east of the 101 … which is the first time that’s really happened since COVID,” Clark said.

The trend is different from just a couple years ago, when tech firms maintained more flexible, remote-friendly policies than the biotech sector, the other dominant industry on the Peninsula.

“There is definitely a dichotomy between the two, where tech is coming in [to the office], and they want to maintain their edge in a hyper-competitive market, so they come in and collaborate,” said Newmark Executive Managing Director Eric Bluestein. “Biotech has advanced from COVID when no one was going in, but I think they’re having a harder time getting people in now.”

Roblox has continued expanding its presence in San Mateo, and Neuralink signed the biggest deal last quarter, leasing 499 Forbes Blvd. in South San Francisco. Impossible Foods sublet about 44,000 square feet of space in Redwood City.

Some former business campuses were also purchased, including the U.S. Geological Survey campus in Menlo Park and Clearview in San Mateo, with preliminary plans to redevelop them into residential projects.

Despite some large deals, the life science real estate marketing isn’t experiencing the same momentum as traditional office space, as the industry has been more susceptible to unfavorable macroeconomic conditions than the AI-heavy tech industry, and venture funding for biotech in the region has been at some of the lowest levels in several years.

Life science developments are unique from traditional office buildings, as they usually require lab space and more robust infrastructure. They’ve seen continuously high vacancy rates — around 30% in the region — in part due to a lot of new developments that have increased supply beyond the current demand.

“There's probably not many applications to finance a new life science development,” Bluestein said. “The rents don’t justify the high cost to do it.”

The slow rebound led to South San Francisco recently approving two agreements giving life science developers 10 years to build out their projects, one at 800 Dubuque Ave. and another at 180 El Camino Real — rather than the traditional two- to three-year entitlement window. In Belmont, which has been trying to build up its life science presence, three of its five major biotechnology projects had been withdrawn or indefinitely paused this year.

Bluestein said he anticipates that life science companies may not lease a lot of the buildings that were originally designed with them in mind.

“A lot of those shell buildings that you see along 101 are going to go to AI and tech companies,” he said.

But 2026 will likely see significant improvements for the sector. Bluestein said that in addition to increased merger and acquisition activity, the XBI — a biotech exchange traded fund — is up 25% year to date, and many pharmaceutical companies' patents are ending soon.

“It’s exceeded the returns of the S&P 500 in the same period,” Bluestein said. “You also have about $68 million of lost revenue due to patent cliffs for big pharma in 2028, so they're looking hard at a lot of different companies to try to refill the pipeline, and so that encourages investment in biotech companies because of the more attainable possibility of getting acquired.”

While funding for the National Institutes of Health is down, subsequent pushback from the industry could still lead to favorable results.

“NIH funding is certainly down, but you’re seeing the biotech speak up and saying ‘we’re losing to China. We’re not encouraging investment in [research and development], and we’re falling behind,’” he said. “I don’t know how, but the sense is that the government will respond, because nothing is more important than that, in everyone’s opinion.”